QROPS Cayman Islands. Pension Tax Relief
British expats living in the Cayman Islands or wishing to retire in the Cayman Islands can now transfer their pension into a QROPS Cayman Islands to maximize pension tax relief. British expats move to the Cayman Islands as personal income tax is nil-rated. British expats living or working in the Cayman Islands can take advantage of their offshore status and transfer their UK pension offshore to somewhere secure like Gibraltar and will no longer have to pay UK taxes on their pension if they stay offshore.
Why live in the Cayman Islands as a British expat?
The Cayman Islands is a British Overseas Territory located in the western Caribbean Sea. The territory comprises the three islands of Grand Cayman, Cayman Brac, and Little Cayman, located south of Cuba and northwest of Jamaica. The Cayman Islands are considered to be part of the geographic Western Caribbean Zone. The territory is a major world offshore financial centre. Despite this, less than 100 Brits live there. There is no tax in the Cayman Islands. Education is compulsory to the age of 16 and is free to all Caymanian children. Most schools follow the British educational system. Ten primary, one special education, a high school and a middle school (‘junior high school’) are operated by the government, along with three private high schools. In addition, there is a law school, a university-college and a medical school. The Cayman Islands print their own currency, the Cayman Islands Dollar (KYD), which is pegged to the U.S. dollar at a fixed rate of 1 KYD = 1.227 USD. A QROPS Cayman Islands allows you to change up your pension into USD, so you don;t suffer from currency fluctuations. There is no income tax, CGT, IHT or corporte tax in the Caymans. So, your pension can be transferred to a QROPS and paid gross.
The Benefits of a QROPS Cayman Islands
What are the benefits of a QROPS Cayman Islands Pension Transfer for UK expats?
• Avoid UK income tax
• Avoid UK dividends tax
• Avoid UK capital gains tax (CGT)
• Avoid UK inheritance tax (IHT)
• Currency choice. You can choose to have your pension transferred to a QROPS denominated in USD, EUR or keep it in GBP
• Have the ability to make higher returns with freedom of investment
• Family Protection: Upon death, the entire pension pot gets passed on to your nearest and dearest
• Security: The pension is held in a secure jurisdiction such asGibraltar which is out of the UK tax net, but has its own strong financial regulations which are tax efficient
What is a QROPS Cayman Islands?
A Qualifying Recognized Overseas Pension Scheme (QROPS Cayman Islands) allows your UK pension to be transferred offshore to reduce your tax burden. Effectively, you will no longer pay UK tax on your pension whilst you are offshore and after 10 years of living offshore, the reporting requirements to HMRC cease.
What is the economy like in the Cayman Islands?
The economy of the Cayman Islands, a British overseas territory located in the western Caribbean Sea, is mainly fueled by the tourism sector and by the financial services sector, together representing 70-80 percent of the country’s gross domestic product (GDP). The emergence of what are now considered the Cayman Islands’ “twin pillars of economic development” (tourism and international finance) started in the 1950s with the introduction of modern transportation and telecommunications. Fishing, shipbuilding, and cotton production boosted the economy during the early days of settlement.
The boom in the Cayman Islands’ international finance industry can also be at least partly attributed to the British overseas territory having no direct taxation. A popular legend attributes the tax-free status to the heroic acts of the inhabitants during a maritime tragedy in 1794, often referred to as “Wreck of the Ten Sails”. The wreck involved nine British merchant vessels and their naval escort, the frigate HMS Convert, that ran aground on the reefs off Grand Cayman. Due to the rescue efforts by the Caymanians using canoes, the loss of life was limited to eight
If you are living in Cayman Islands at the moment, you can take advantage of your offshore address in order to move your UK pension into a QROPS to avoid further UK taxes down the line. A QROPS can be an appropriate vehicle for tax efficiency, but also allows you to invest what you want. You can invest in cash, bonds, mutual funds, ETF’s, hedge funds as well as in different currencies. A USD portfolio may be useful for the Cayman Islands.
More than 40,000 companies were registered in the Cayman Islands as of 2000, including almost 600 banks and trust companies, with banking assets exceeding $500 billion. Caymanians and Cayman Islands companies are not subject to any form of direct taxation. However, the Cayman Islands Government’s primary source of income is indirect taxation. An import duty of 20% is levied against goods imported into the islands.
Tax on a QROPS in the Cayman Islands
At the moment there is no personal income tax in the Cayman Islands. In fact there is no capital gains tax, no corporate tax and no tax upon death (2013). So, your QROPS would attract no tax in the Cayman Islands. If you elect for the Gibraltar QROPS, your pension would be deducted a flat 2.5% income tax at source in Gibraltar, but you would avoid all UK taxes.
However the government is considering introducing an income tax as government spending is increasing. Government spending has increased 6.7% whilst GDP has grown less than 4% from 2000 – 2011.
What are the Pension Rules for the QROPS Cayman Islands
Do I need to move my pension to Cayman Islands?
No. Your pension can be transferred to Gibraltar where it will be out of the UK tax system. You just pay a flat 2.5% rate of income tax when you draw your pension, but you avoid the 55% tax upon death as well as UK income taxes which could be up to 50% depending on the size of your pension pot. For final salary schemes we can do a free pension analysis for you to see whether a transfer is worth it or not.
Do I need to live and retire in Cayman Islands?
No, as long as you live outside the UK, either in the Cayman Islands or elsewhere abroad, you can transfer to a QROPS. Once the pension is transferred, you can live or retire anywhere outside the UK. If you ever go back to the UK, your QROPS will revert to a typical UK SIPP and you would pay UK taxes on it, but you would also get time apportionment relief.
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QROPS Cayman Islands article written by QROPS Specialists.